3 More Common Mortgage Questions Answered
Last week we went over common mortgage questions. We didn’t get to cover all questions, so we thought we’d revisit the topic. Here are more common mortgage questions answered.
What’s the difference between a mortgage pre-approval and a mortgage approval?
Although a mortgage pre-approval is helpful to have, it doesn’t guarantee mortgage financing. You still need to go through one final step: the mortgage approval.
A mortgage pre-approval isn’t as thorough as a mortgage approval. In a mortgage pre-approval, a lender will accept your income without verifying it. In a mortgage approval, the lender will verify your income by requesting documents, including letters of employment, recent payslips and tax forms. Your lender will also call your employer to confirm details on the letter of employment are accurate.
It’s the same thing with your down payment. The lender will take whatever amount you say you’re putting down in the pre-approval at face value. Whereas with the mortgage approval, the lender will ask for three months of bank statements to verify the source of the funds.
With the property, it’s just a hypothetical property with a pre-approval. With approval, the lender looks at the individual property and confirms that they will lend on it.
Hiccups can happen with any of these steps. That’s why you might still want to include the condition of financing.
Can I use my mortgage to cover closing costs?
No, you can’t. Lenders expect you to be able to cover closing costs out of your pocket. If you’re not able to do that, there are a couple of options.
You could borrow funds to cover your closing costs. The easiest way to cover closing costs is on an unsecured line of credit. As long as you qualify for this additional debt, it should be fine.
If you don’t qualify for extra debt because your debt ratios are already tight, you might consider taking out a cashback mortgage.
The cashback you receive from a cashback mortgage can’t be used towards your deposit and down payment, but it can be used towards your closing costs; by doing that, you can avoid taking on additional debt and still qualify.
What if I’m also selling my old home? How does that work with mortgage financing?
If you’re not a first-time homebuyer, it’s pretty common to buy and sell at the same time. If the home you’re selling isn’t closing until after the home you’ve purchased, you might wonder how it works from a mortgage financing standpoint. Bridge financing helps solve this.
Bridge financing is temporary financing that helps you close a home you’ve purchased before the one you’ve sold closes. To get bridge financing, you need to have a firm offer on the house that you’ve sold at least 3-4 weeks before closing. It’s important to keep that in mind when choosing the closing dates of both properties.
The Bottom Line
Do you have more mortgage questions that remain unanswered? Speak with your mortgage experts today to get to the bottom of your unanswered questions.